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Seattle’s Public 
Terminals 

and Their Relation to 

Northwest Wheat 

BY 

ROBERT BRIDGES 

'i 

President Port of Seattle Commission 


TENTH ANNUAL CONVENTION OF THE 
WASHINGTON STATE GRAIN GROWERS, 
SHIPPERS AND MILLERS’ ASSOCIATION, 
PULLMAN, WASHINGTON, JANUARY 4, 5, 
AND 6, 1916. 







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D. of D. 
SEP 7 1915 





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I. SOME PROBLEMS OF PRODUCTION. 


The wheat groAvers of the Nortlnvestern States, and partic¬ 
ularly of the State of Washington, have experienced many 
difficulties since the time of admission of this State into the 
Union. 

Early Struggles, 

In the early nineties the wheat farmers of Washington faced 
a peculiar dilemma. After they produced and harvested a crop 
the selling price Avas distressingly Ioav and the financial obli¬ 
gations imposed upon them were exceedingly drastic. In order 
to secure the money necessary to harvest and place their crop 
upon the market they were obliged not only to give a lien upon 
the grain produced, but also upon their homesteads. The 
moneylender didn’t even stop at that. In addition thereto 
a deficiency judgment against their future efforts was pro¬ 
vided fo™, running to the credit of the party who loaned the 
money necessary to produce and harvest the crop. The hard- 
pressed farmers were the recipients of advice from many 
sources Some advised them to engage in hog raising and feed 
their gram. A number followed this advice, but they, like 
the others, landed in a slough of financial despair. Whichever 
way they turned bankruptcy seemed the inevitable result. In 
1897 the legislature repealed the deficiency judgment law, but 
the succeeding legislature of 1899 re-enacted a similar law. 
Up to that period in our State’s history, the resultant benefits 
that flow f rom the A\ r ork of educational institutions of the type 
of the Sta'e Agricultural College at Pullman, the University 
of the State of Washington, and like institutions, had not had 
a very material effect upon the producers so far as it related to 
the financing and marketing of their grain. 

Since that period, due principally to the education of the 
grain producers and logical application of the training given 
to their affairs, their conditions in general show a very neces¬ 
sary marked improvement. The application of the results of 
scientific experimentation in the field of production is now 
becoming a Avorld-Avide practice. 


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Wheat and Civilization. 

Wheat is the bread stuff of civilization. It is the grain 
that is rapidly dispossessing the primitive cereals, such as the 
rye and millet of Central Europe and the rice of the Orient. 
It is the grain that marks the transition from pastoral life 
t d agriculture on the margins of population. It is wheat that 
is pushing back the stockman and reclaiming the prairies to 
the plow in Canada, in the Argentine Republic and in the vast 
expanses of Siberia. Wheat more than any other commodity 
stimulated the remarkable ship-building period which preceded 
Europe’s great war. It fills the holds of steamers that shuttle 
between the ports of the world. The United States produces 
six hundred or seven hundred million bushels each year. In 
the Pacific Northwest we produce sixty or seventy million 
bushels, and our sparse population consumes but four or five. 

Co-Operation Illustrated in Germany. 

Among other triumphs of German efficiency, which 
upon analysis will be found to mean co-operation among the 
German people under Government leadership, it is worth while 
to point out that wheat production per acre in Germany is at 
least two and a half times what it is in the United States. It 
illustrates again the advantages of co-operation. The by- 
porducts of Germany’s immense chemical industries, as well 
as the nitrates gathered from the seven seas, have been poured 
upon. Germany’s soil. Soil which has been in service for a 
thousand years is maintained in marvelous fertility. Bulle¬ 
tins of the United States Department of Agriculture, of the 
Minnesota Experiment Station, and other authorities, disclose 
that wheat growers in the United States are taking chemicals 
out of the soil equal in value to the annual labor cost from 
seedtime to harvest. The opportunity of the agricultural col¬ 
lege in the United States is a wonderful opportunity. It can 
triple the production of cereals in a generation by intelligent 
leadership and insistent, courageous education of the people. 

Power From By-Products. 

For instance, its leadership can teach the farmers how to 


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produce denatured alcohol from farm wastes, largely driving 
the motor power of modern farm machinery with by-products 
saved, if her professors and lecturers are willing to face the 
ridicule of the press that is almost uniformly controlled by 
Big Business; and if they can forget the persevering and be¬ 
numbing suggestions emanating from the Rockefeller Founda¬ 
tion. The “rules of the game” which may have been fair in 
the days of the ox team and the empty prairie, when the rail¬ 
road was to the Northwest like an irrigation canal in a sun- 
blistered valley, are no longer fit to be the rules of this gen¬ 
eration, if they do not permit the equality of opportunity. 
The “dead hand” of habit which restrains the economic pro¬ 
gress of the people is as much to be feared as the dictation of 
men of a past age who lived under conditions utterly differ¬ 
ent from those which surround us. 

The “Dead Hand” of Habit. 

The “dead hand” of habit rests upon the wheat growers 
of Washington. It holds them back from progress which is 
their due. It not only takes out of their pockets earnings 
which belong to them and turns such earnings over to the 
manipulators of useless institutions; it also costs them wastes 
which benefit nobody. For instance, the habit of the Northwest 
has been to ship grain in bags. Profits taken from the wheat 
grower in supplying this useless garment for the grain reaches 
even to far-away India. Through this habit, the farmers’ 
nickels are literally scattered around the globe. The argu¬ 
ments why the bag system cannot be abandoned are numerous 
and vociferous according to the profit involved. Invested 
Capital cries out with exceeding great pain at the thought of 
Washington farmers shipping their wheat in bulk. The har¬ 
vester on the hillside, the ramshackle warehouse at the railroad 
siding, the exporter at the terminal who influences the country 
warehouse and the country bank, the railroad freight agent 
who plays billiards with the big miller in the city club—these 
men cannot conceive that the waste incident to the shipment 
of Washington wheat in bags can be prevented. “Whatever 
is, is best,” they say, “let us not change the rules of the game. 
We might lose our job.” 


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II. SOME PROBLEMS OF TRANSPORTATION. 


Wheat Via the Panama Route. 

Transcontinental railroad men like James J. Hill, millers, 
exporters and ship owners expect to see much of our surplus 
wheat pass through the Panama Canal to American centers 
of population on the Atlantic coast. It is the hope of the 
Pacific coast that there will be less exporting of raw wheat 
from the Palouse country, from the Big Bend district- and 
other Northwest areas to Liverpool and other foreign ports. 
It is our hope that the grain will move out as a manufactured 
product in the form of flour and breakfast foods to supply the 
tens of millions of people who live near New York, Philadel¬ 
phia and Baltimore, bringing return cargoes of merchandise 
we want through the Panama Canal. 

Lower Freight Rates by Water. 

It is our hope to thus get the full benefit of that gov¬ 
ernment-owned and government-operated highway across 
the Isthmus, and the cheap freight rates which water car¬ 
riers in free competition and with plenty of cargo can 
give. This is said in no spirit of antagonism to the 
railroads. The railroads have been the backbone of civili¬ 
zation in Western America,—the very arteries of life to the 
sparse populations of our Northwest. Their reduction .in 
freight rates on goods carried from one edge of the continent 
to the other has been one of the notable triumphs of efficient 
Big Business organization. Yet in the face of the exceedingly 
small cost per-ton-mile of transporting trans-continental 
freight over American railroads, it must be remembered that 
the figure given is only the average figure. It is susceptible 
of still greater reductions. Railroad men point out that the 
per-ton-mile freight rate in the United States is far below that 
of the government-owned railroads of Germany, for instance. 
The fact is, that the wonderful system of rivers and canals in 
Germany enables bulk commodities like wheat, coal and lumber 


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to move by ship and barge for vastly less than the freight rate 
of American railroads. The German railroads handle express 
freights with great efficiency and charge less than are collected 
under American railroad tariffs on the same goods. 

Warehouse Problems. 

The sins of the interior warehouse are the sins of the profit- 
seeker the world over. At common law to forestall or monopo¬ 
lize the market was a crime. Now the interior warehouse in 
Washington is indispensable. But some of its practices how¬ 
ever, can be dispensed with. The relationship existing be¬ 
tween chains of spur track warehouses in the Northwest, and 
the common carriers, and the exporters who lease terminal 
warehouses in Seattle, Portland and Tacoma are close and in¬ 
teresting. The system has grown up. The banks are big fac¬ 
tors in the continuance of the system. The wheat grower can¬ 
not ship his crop without leave of the system. In the first place 
the average grower must borrow money to harvest his crop. 
For this, he must rely upon the country bank which is ex¬ 
ceedingly sensitive to suggestions of the big city bank which 
owns some of its stock and controls its reserve deposits. The 
wheat grower’s notes for crop moving purposes mature early 
in the fall. The grower must sell his crop soon after harvest 
to pay those notes. 

The grower cannot order his cars from the railroad and 
make shipment direct—except theoretically. Practically, he 
must haul his grain to the leased warehouse in the control of 
the grain buyer. The grain buyer is of course controlled by 
the miller or the exporter in the terminal city. Even where 
farmers build co-operative elevators on spur tracks there is a 
tendency to lease them to the big exporter or big miller or 
their subsidiary organizations. 

Co-Operative Elevators. 

In Minnesota and the Dakotas the farmers have constructed 
hundreds of local co-operative elevators. They have achieved 
definite financial results in higher prices paid for their grain. 
They have also checked various sharp practices designed and 


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utilized as a graft on the grain growers. As a result of co¬ 
operation and collective courage, they have stopped a bogus, 
unearned switching charge collected for years in Minneapolis. 
They have abolished an illegal demurrage charge applied to 
cars of farmers’ wheat. They have checked fake sales between 
commission brokers and subsidiary companies. They have ex¬ 
posed a persistent fraud of unfair grading and of raising 
grades at terminals by mixing poorer grain with better grades. 

The business system which for years has taken toll from 
wheat growers and other classes of farmers evinces no enthu¬ 
siasm for co-operation or independent collective action among 
them. Visible and invisible obstacles are thrown in the way. 
Little groups of public spirited growers, actuated by commu¬ 
nity-interest, are no match for the great business organizations, 
experienced for years in collecting the farmers’ grain, paying 
the minimum price and turning it over to the terminal mill or 
foreign vessel lying in port. 

It would seem that the next step is to invoke the collective 
power of government organized for action to attain the wel¬ 
fare of growers’ communities. 

Public Ownership in Seattle. 

In Seattle, the people not only have a public water system 
within the city limits, but they have gone back into the Cas¬ 
cade Mountains and purchased a mountain valley, a mountain 
lake, an entire watershed. As a by-product of the public water 
system, they have developed one of the finest public lighting 
systems owned and operated by any American city. They not 
only supply light at 5 y 2 cents per K. W. hour, but they fur¬ 
nish power for manufacturing and domestic purposes at figures 
astonishingly minimized. The people have accomplished this 
in the face of the opposition and misrepresentation of the great 
Stone & Webster traction and hydro-electric corporation, which 
a few years ago, threatened to monopolize this form of public 
utility. 

Not only does the City of Seattle have those public utilities 
which minister to the comforts of life, but the people of Seattle 
have recognized that as a harbor city, they hold great oppor- 


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tunities in trust for the people of the interior. They organized 
a Port Commission, embracing King County in its limits, and 
authorized the expenditure of $6,300,000 in the comprehensive 
scheme of public wharves, public warehouses and public ferries. 

Public Terminal Utilities. 

The system of warehouses includes a great public pier half 
a mile long, and a block wide, equipped with the largest me¬ 
chanical handling devices on the Pacific coast; a great con¬ 
crete warehouse, (seven-stories in height) for the cold storage 
of 900 cars of apples, and a second concrete public cold storage 
plant and warehouse within a stone’s throw of the famous 
Farmers’ Public Market in Seattle; and additional merchan¬ 
dise warehouses sufficient to accommodate a large share of 
Alaska’s $30,000,000 annual salmon crop, as well as White 
River potatoes, Ellensburg hay, and the coffees, sugars and 
endless other commodities brought in by rail or water for 
Seattle wholesalers to distribute. 

Great Public Elevator. 

More important yet from the standpoint of the wheat 
grower, is the construction at tidewater of practically 
the only modern grain elevator on the Pacific coast, a 
concrete structure with a capacity of half a million 
bushels of bulk grain. It is the first publicly owned 
and operated grain elevator in the United States. Supporting 
this grain elevator is the Hanford Street public wharf available 
for bag storage of 300,000 bushels additional. In this one ter¬ 
minal at the present time, there is in storage in bulk and in bag 
over 650,000 bushels of wheat. 

If King County in the furtherance of its economic welfare 
and the prosperity of its citizens can build public wharves, and 
waterfront safe-deposits for the storage of goods in transcon¬ 
tinental and trans-Pacific trade, surely the people of interior 
counties which are primarily agricultural should have and can 
obtain local public elevators for the reception of grain in bulk 
and in bag, from which carloads of grain belonging to the com¬ 
munity can be shipped when directed by the good sense of the 
locality instead of at the times dictated by the whims of the 


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grain market gambler or the managers of foreign exporting 
concerns. 

Co-Operative Terminal Market. 

In Minnesota, the efforts of the wheat farmers to establish 
a co-operative terminal market at Minneapolis was met with 
fierce resistance. It succeeded in establishing itself only after 
heart-breaking experiences and remarkable persistence. 

“For six years, agitation has been insistent in North Da¬ 
kota to have the State build and own a terminal elevator at 
Minneapolis or Duluth. Twice the people of the State voted 
overwhelmingly for this proposal. The first time seventy-five 
per cent of the votes were in the affirmative; the second time 
in 1914, eighty-three per cent; yet last February, the legisla¬ 
ture by a definite vote refused to carry out the will of the 
people twice declared.” (See articles in Pearson's Magazine.) 

Terminal Elevators and the Railroads. 

At the seaport cities in the State of Washington, the ware¬ 
houses which do service as storage elevators are largely in the 
control of the railroads. Usually they are leased to English 
or other exporting concerns. In Seattle in particular, the 
railroads have divided the harbor front into sub-ports. If you 
live at a competitive point, a car of grain will be switched to 
the terminal warehouse of another road without charge. The 
switching is absorbed by the railroad getting the line haul. 
But if you live at a non-competitive point and ship to the ele¬ 
vator on another railroad, you pay the terminal switching 
charge yourself. The leased warehouse or elevator at tide¬ 
water is the mother of a whole brood of local warehouses in the 
interior. It is a monopoly situation. The discriminatory prac¬ 
tices which crop out in every monopoly are utilized to take an 
unearned profit on the farmers’ grain. Over 300 bags of wheat 
were swept from the floor of the Whatcom Avenue Public 
Warehouse last season. It, of course, belonged to the owner of 
the grain. In a private warehouse or elevator these sweepings 
go to the “house” and not the shipper. The dry grain of 
Eastern Washington takes on weight in the humid atmosphere 


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of Puget Sound. This added weight yields no profit to the 
wheat grower. Whether or not complaints of timid grading 
does injury to the grower in Washington as it does in Minne¬ 
apolis, I do not know, but it is certain that grain which moves 
out from terminal storage is much less sharply scrutinized than 
grain which moves in. Senator McCumber of North Dakota 
declared on the floor of the Senate last year that unfair grain 
grading costs the farmers of the West and Northwest $70,- 
000,000 a year. In two years, the terminal elevators in Min¬ 
neapolis received 15,000,000 bushels of No. 1 Northern wheat 
and shipped out nearly 20,000,000 bushels. The excess of nearly 
5,000,000 bushels was made up by mixing in inferior grades 
and shipping it out as No. 1. Grain growers got none of the 
benefits of the legitimate cleaning and smutting and mixing; 
and the consumers of the impure wheat paid the highest market 
price for the adulteration sold as pure food. 

Impartial Terminal Service. 

The opportunities for impartial public storage of grain, 
for cleaning and smutting and legitimate mixing, for saving 
in bag leakage and gaining the natural swell of the great 
wheat crop of the Northwest is already afforded to the grain 
growers of the State of Washington. The people of the State 
did not vote authority to build a State Terminal Elevator, but 
the people of King County, through the Seattle Port Commis¬ 
sion, have constructed and operate the finest elevator on the 
Pacific coast immediately adjacent to a two-story public wharf, 
a quarter of a mile in length. Here is efficient and impartial 
and effective grain storage at tidewater. If the grain growers 
singly and in co-operation do not make extensive use of the 
facilities afforded, it will not be the fault of the common peo¬ 
ple of King County. It will not be the fault of the elected Port 
Commissioners in Seattle. It will be the “dead hand” of habit, 
or the libel and slander of the grain gambler. It will be the 
fault of those private organizations for profit known as public 
newspapers. The newspapers circulated over the State of 
Washington have been singularly silent in calling to the atten¬ 
tion of the people the opportunities for direct shipment of in- 


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terior goods to terminal markets. You have not been told that 
you can ship two or a dozen carloads of wheat to the Port Com¬ 
mission’s elevator or adjacent warehouse, have it weighed and 
graded by the State, have the freight charges advanced at 6% 
interest, and have a warehouse receipt given you which has 
behind it all the property of King County. If the shipment be 
in bags, the identical wheat is in all cases delivered including 
the sweepings and added weight; and only identical grades of 
bulk grain are placed in the big concrete bins. The warehouse 
receipt issued by the Port Commission is entirely free from 
that interesting little device sometimes used by private ter¬ 
minal warehouses, ‘ ‘ the option to substitute grain. ’ ’ The Port 
Commission neither buys nor sells grain nor any other com¬ 
modity. No employee is permitted so to do. If your grain in 
storage suddenly rises in value 10 cents, it cannot be sold and 
other grain substituted when the price drops later. 


C Dominion Building Great Elevator at Vancouver. 

Official advices just received from American consular offi¬ 
cers refer at considerable length to the extensive work being 
done by the Dominion government in the way of providing 
elevator facilities, both on the West and East coasts, for the 
prompt handling of the country’s wheat yield. 


The latest undertaking of that kind at the hands of the gov¬ 
ernment is the elevator at Vancouver, which is to have a capac¬ 
ity of 1,250,000 bushels. It will be but one of a series of similar 
undertakings for the storing and handling of the grain output 
of the prairie provinces. It will cost $250,000. 


The total government elevator capacity of the Dominion is 
152,000,000 bushels, divided into districts as follows: Eastern 
Canada, 30,000,000 bushels; Fort William district, 42,000,000 
bushels; west of the Great Lakes, 80,000,000 bushels. The new 
elevator at Vancouver is built to provide facilities for grain 
to be carried by water from the Pacific to the Atlantic by way 
of the Panama Canal, to Europe and to the Orient. 


Water transportation by way of the canal being cheaper 
than by rail across the continent, it is believed that a consid¬ 
erable proportion of grain grown in the prairie provinces will 


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pass through Vancouver, greatly increasing the tonnage and 
importance of that port. 

The new elevator will not be as large as some already built 
by the Dominion government. There is one at Fort William, 
for instance, having a capacity of 11,000,000 bushels, j 

Wheat to be Exported. 

It is announced by the Canadian government that much de¬ 
pends upon first shipments through the Vancouver port by way 
of the Panama Canal, to prove whether grain can be success¬ 
fully shipped from Vancouver in bulk. The moisture content 
of the best Canadian grain, it is pointed out, is 12.5 to 13 per 
cent, or about the same as that of Argentine grain, which has 
crossed the equator in shipments without serious damage. 

Two factors, it is announced, will determine whether the 
new Vancouver elevator will handle wheat next year for trans¬ 
port by way of Panama. These are the available tonnage and 
the question of whether wheat can be carried to Europe by 
Panama as cheaply as by the Atlantic route. 


HI. SOME PROBLEMS OF FINANCE 

Limitations of the Country Bank. 

The limitations of the country bank are well known to every 
grain grower. Not only is its capital limited, but its stock is 
often controlled by the managers of city banks who exercise 
at least a moral control over its conduct. Its manager is con¬ 
servative by training. The “dead hand” rests strongly on his 
shoulder. ‘ He has more faith in the existing system and the 
established local warehouse than he has in any collective group 
of farmers or co-operative program. He discounts notes of 
the local warehouse and thus encourages a system whereby 
such warehouses make advances to the grain glower. He is 
in business for profit. By instinct he supports the practices of 
a single well-known company like the local warehouse concern 
rather than the aspirations of a farming community. The 
great names of city banks, of terminal millers and elevator 
corporations, of wheat exporting organizations command the 

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banker’s utmost admiration. Their practices he condones. He 
is accustomed to complaints of agriculturists and .scouts the 
ideas of co-operation. More equitable returns on farmers’ 
labor and comforts approximating those of city dwellers 
appeals less than visible present profits. He fears the extension 
of state activity. He frowns on any proposal to change “the 
rules of the game.” You will remember that when the pro¬ 
posal to exercise greater control over the American Banking 
System through the Federal Reserve Act was first submitted, 
the bankers as a class, from Wall Street to the smallest town 
in the sage brush, opposed such government control. Appar¬ 
ently they wanted their profits and their panics undisturbed. 
Unquestionably they feared that Uncle Sam would go into the 
banking business in Panama and Alaska. And incidentally, 
Uncle Sam through the arm of the Federal Courts is now 
operating one-sixth of the railroads of the country. He is the 
Doctor to whom the seasick owners go for relief. They con¬ 
valesce and recover on a receivership diet. 

The problem of warehousing of grain is one of the various' 
studies confronting the grain producers of the United States. 
To a limited extent this has been met in the past by railroads 
and private brokerage concerns. The scarcity of warehouses 
and the manner of handling grain under the present system 
has failed to solve the problem so far as the producer is con¬ 
cerned. 

The Fight for Free Markets. 

“LaFollettes” for December, 1915, says: 

“Formerly there was a great contest for just and reason¬ 
able rates to enable the farmers of the Northwest to transport 
their products to market. 

“At that time the markets of the country were free, open, 
and competitive. The great problem was to secure reasonable 
rates to enable them to reach the market. That was the goal. 

“Today the sons of the sturdy pioneers of the whole North¬ 
west are organizing another great farmers’ movement. This 
time it is a movement to Free Their Markets from the domina¬ 
tion of combinations which have suppressed competition and 
which arbitrarily fix the prices of all farm products. 


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These combinations manipulate, prices, manipulate the 
grading of the grain, swindle the producers on switching 
charges and on weights as well. There seems to be no limit 
to their greed and their cupidity. 

“December eighth, ten thousand farmers from the states 
of Montana, the Dakotas, Iowa, Minnesota, and Wisconsin, 
assembled in Saint Paul, and broke ground for a co-operative 
elevator to be owned and operated by the farmers. 

“For three years this movement has been on. Its success 
is already a demonstration. This organization is NOW SUP¬ 
ERINTENDING THE MARKETING OF MILLIONS OF 
BUSHELS OF THE WHEAT CROP OF 1915.” 

In the same magazine Samuel Hallett Greeley describes as 
follows “The Struggle for Farm Freedom” which he calls “A 
Battle Royal Between Northwest Raisers and the . Grain 
Trust”: 

A Battle Royal Between Northwest Wheat Raisers and the 
Grain Trust 

For the past thirty years, at least, the wheat raisers of the 
Northwest have been subjected to a marketing system at prom¬ 
inent terminals, chiefly Minneapolis and Chicago, which is 
meeting with determined opposition. Not until recently has 
any effective organization become sufficiently strong to prove 
a factor in the battle at the Grain Terminals. About three 
years ago a number of thoughtful farmers began to study the 
inside workings of the Minneapolis Chamber and the Chicago 
Board of Trade with a view of unraveling the mysteries of 
those organizations. 

These farmers became convinced that the public Avarehouses 
at Chicago and Minneapolis, by virtue of political alliances aricl 
State protected franchises, together with privileges granted 
them through the Exchanges in which they held memberships, 
were enabled TO ABSOLUTELY DOMINATE PUBLIC STOR¬ 
AGE FACILITIES of the two most important grain markets 
in the world. 

These farmers also learned that the domination of public 
storage led to the artificial mixture and accumulation of grain 
which was used as the basis and insurance of an immense 
“short selling” system and control of the trading in “grain 
futures;” that this “short selling” system became the basis 


15 


of “freezing out” buyers of “futures” and the collection of 
differences through clearing houses of these Exchanges and 
the absorption of margins from unwary speculators who were 
enticed in the “future game.” 

It became perfectly clear that this manipulation and selling 
out of “futures” was the most potent factor in the deprecia¬ 
tion of wheat values and that actual wheat prices followed 
the course of the “future” market, and that there were three 
hundred times more “futures” sold than actual wheat received 
at these markets. 

The further discovery was made that immense private wire 
systems were established throughout the country extending 
from ocean to ocean, for the express purpose of inviting specu¬ 
lators of all kinds to enter the “game” in grain and buy on 
margins, whose purchases were in many cases made from the 
elevator monopolies who controlled the deliverable grain at the 
terminals, such monopolies being seasoned, trained profession¬ 
als, while the buying speculators were merely novices in the 
“game.” 

The Northwest farmers, thus equipped with information, 
began to study what may be termed “The Trip of the Bushel” 
from the farmer to the consumer. It was found that when 
grain leaves the farm it is sold at the country elevators which 
of course demand a profit for handling. The grain then goes 
to Chicago or Minneapolis where the commission merchant 
exacts a charge of one cent per bushel. The commission mer¬ 
chant frequently sells this grain to a company which he himself 
controls and this “dummy” or “subsidiary co-worker” also 
absorbs a profit. The “dummy” then sells it to an elevator 
man who manipulates grain in a mixing house, known in the 
trade as a “hospital.” This elevator also exacts a profit. The 
grain then enters public storage where the excessive charge of 
one cent per bushel per month is absorbed from the product. 
The receipt of the grain in public storage then becomes the 
foundation for the “hedging” and “short selling” system in 
the pits which results in the “selling short” of the tremen¬ 
dous lines of “futures” which today are the curse of the 
wheat raisers of the Northwest. 

This “short selling” system has given birth to such ex¬ 
pressions in the trade as “raiding the market,” “hedging,” 
“effective selling pressure,” “bear onslaught,” “drastic 
liquidation,” “selling drive,” “pit speculations,” “stop-loss 
orders,” “cleaning out of the weak holders,” etc., which fill 
the columns of the daily newspapers. 

It did not take these sturdy farmers very long to realize 

16 


that the whole wheat situation of the country was based upon 
THE PARMER BEING OBLIGED TO TURN OVER HIS 
CROP TO GRAIN GAMBLERS AND WAREHOUSE MANIP¬ 
ULATORS, who were protected by ironclad rules of Commer¬ 
cial Exchanges, with favorable licenses granted by such Ex¬ 
changes, and in many cases also protected with railway rates 
and privileges which the public was unable to secure. 

It became further evident to farmers that in order to protect 
themselves from these conditions it would be necessary to con¬ 
trol their own grain as completely as possible from the farm to 
the independent millers who grind wheat into flour. This led 
to the organization of many independent farmers’ co-operative 
elevators throughout the West and more recently to the estab¬ 
lishment of a farmers’ Terminal Selling Agency in the City of 
St. Paul, Minnesota, known as the Equity Co-operative Ex¬ 
change. This organization is composed entirely of fanners en¬ 
gaged in the business of handling grain from these independent 
farmers and farmers’ elevators DIRECT to millers and con¬ 
sumers throughout the country. 

It is but natural that this control of farmers’ grain by 
farmers themselves through their own Marketing Agency, 
should arouse the antagonism of the Minneapolis Chamber of 
Commerce and the Chicago Board of Trade, who have for so 
many years controlled and manipulated the markets through 
the possession of the grain which farmers were obliged to give 
to them on account of lack of organization to handle it them¬ 
selves. 

As a result of this independent attitude of farmers, and the 
establishment of their own terminal distributing company, 
together with the intention of farmers to build proper terminal 
elevator facilities to assist them in marketing, the Minneapolis 
Chamber of Commerce instituted a lawsuit in Fargo, North 
Dakota, through Attorney General Linde of that State, to dis¬ 
possess the farmers of their charter, being incorporated under 
the laws of North Dakota, and to force the Equity Co-operative 
Exchange into a receivership, on the grounds that the farmers 
are defrauding farmer shippers by false representations as to 
the marketing of products through their own agency at St. 
Paul. 

This suit thus instituted at the instigation of the Minne¬ 
apolis Chamber of Commerce, led to a number of mass meetings 
which have been filled with more enthusiasm than has been 
manifested in the Northwest for many years. 

Confronted with the spectacle of a great State, through 
its public officials in the interests of the large organized grain 

17 


Exchanges of the country trying to crush an organization of 
farmers engaged in the single purpose of endeavoring to es¬ 
cape the rascality of the organized forces at the terminal mar¬ 
kets, the Equity is creating a sentiment in the Northwest equal 
in spirit and enthusiasm to the days of the Civil War. 

A BATTLE ROYAL IS ON INVOLVING THE GREAT 
PRINCIPLE AS TO WHETHER OR NOT THE PRODUCERS 
OP THIS COUNTRY MAY BE PERMITTED TO MARKET 
THEIR CROPS THEMSELVES WITHOUT BEING DOMI¬ 
NATED AND DICTATED TO BY THE ORGANIZED TER¬ 
MINAL MONOPOLY OPERATING WITHIN THESE GRAIN 
EXCHANGES. 

The fight in the Northwest is being led chiefly by George 
S. Loftus, the sales manager of the Farmers’ Terminal organi¬ 
zation, the Equity Co-operative Exchange in the City of St. 
Paul. Associated with him in the active work are Ex-Con¬ 
gressman James Manahan of Minnesota, Benjamin Drake of 
Minneapolis, M. D. Munn of St. Paul, J. M. Anderson and the 
splendid Farmer Board of Directors of the Equity Co-operative 
Exchange, as well as hundreds of Northwest farmer stock¬ 
holders. 

It must not be overlooked that the farmers themselves are 
a great fighting force and many splendid champions of the 
independence of Agriculture are numbered among the leaders 
in this progressive movement. 

Last February, during a very spirited debate in the House 
of Representatives at the Capitol at Bismark, N. D., in pleading 
for the establishment of an open market for grain, freed from 
the curse which now exists at the terminals, one of the Equity 
speakers voiced the sentiments of a large number of farmers 
who marched up to the Capitol building and requested a hear¬ 
ing in favor of a state-owned elevator to be established by 
North Dakota in the City of St. Paul 

These words are so expressive that they are offered in the 
hope that the public may become more fully aroused as to 
conditions which now exist against the interests of the North¬ 
western producers: 


THE PIT 

“At 9:30 the gong in the tower signals the debauch. Hun¬ 
dreds of men jump, rush, grab, tumble and yell in the great 
whirl-pool of the pit. Every ear trained for the offer, every 
eye searching for the bid, they swoop down upon one another 
with the swiftness of the vulture and the talons of the eagle 
to devour the dollar, even as buzzards push and fight for the 

18 


dead carcass on the plains. But in the midst of the intoxica¬ 
tion, this drunken frenzy of money-mad insanity, there stands 
the cool, trained veteran, the elevator monopoly. Seasoned 
with years of experience, fortified with the confidence of his 
State-Protected franchise, safeguarded with the blood-money 
of the farm and the mulched millions of the weakminded, he 
suddenly dives upon the maddened throng and as the lion scat¬ 
ters the smaller beasts, he proceeds to devour the weaklings 
which the private wires, black-boards and Chamber ‘cappers’ 
have invited to his daily feast. 

“The mad pit in action! Cities boast of its triumphs, 
though its very doors are strewn with the memories of shat¬ 
tered fortunes, and the dying groans of suicides, embezzlers, 
and financial wrecks. 

“Yes, this is the game which shapes the destinies of the 
farm, controls legislatures, subsidizes the press, moulds public 
opinion and forces children to follow the plow. 

“Oh! Ye mighty pit! ‘Vain are your victories, infamous 
are your spoils ! ’ ” 


Wheat Prices Fixed by “Futures.” 

In fact, an analysis of the world price of grain based on the 
Liverpool market and the visible supply in Argentine Repub¬ 
lic, in India, in Russia, or Egypt, will often be found to be only 
the guess of .the grain gamblers as recorded in bets on “fu¬ 
tures” made on the Chicago Board of Trade or Minneapolis 
Chamber of Commerce. And the differential between the value 
of grain in the little interior warehouse of the Northwest and 
the big terminal elevator at tidewater will be found to be 
largely made up of a lot of sharp practice tolls which can be 
eliminated by collective action and by use of the public facili¬ 
ties I have described. 

New Orleans Imitates Seattle. 

Advanced students and thinkers along this line have shown 
conclusively that other methods must be employed. Following 
an investigation of the extensive system of publicly owned and 
operated warehouses in Seattle provided by the Seattle Port 
Commission the Port Commission of New Orleans procured a 


19 



law at a special session of the Legislature of Louisiana, June, 
1915, to enable them to do likewise. As a result New Orleans 
is being provided with a $3,500,000 Cotton warehouse terminal 
in connection with the State-owned docks and waterfront. The 
State is also at work building a public grain elevator. 

It affords me gratification to be able to quote from a 
thought-compelling article written by the Honorable W. B. 
Thompson, Commissioner Public Utilities, of the City of New 
Orleans. 

To make the idea more easily grasped in the grain belt of 
the Northwest I have substituted the words “Grain’’ and 
Grain Elevator” for “Cotton” and “Cotton Warehouse.” 

Public Utilities Commissioner Quoted. 

“The faulty marketing conditions under which we have 
been laboring are these: 

“The crop, which the mills require twelve months to con¬ 
sume, is sold by the producer within a few months. This fact 
creates a situation entirely in favor of the buyer and against 
the seller. The obvious remedy for this detrimental condition 
would be for the producer to market his crop gradually 
throughout the twelve months, or as demand calls for it. In 
this case the producer would receive the reasonable value of his 
product. But it so happens that this orderly marketing is not, 
under present conditions, feasible. In the first place, the crop 
was formerly, and is now to a very considerable extent, made 
on credit. The obligations of the farmer, the merchant and 
the financial agents are all made to mature during the fall 
months. When, therefore, the crop is gathered, it becomes 
necessary for the farmer to turn it into money in order to pay 
his merchant, who in turn has his own maturing obligations 
to fulfill. In order to realize these necessary funds the Grain, 
or a sufficient part thereof, must either be utilized as the basis 
of a loan or else sold. Here lies the crux of the trouble. The 
country has generally no adequate and inexpensive warehous¬ 
ing facilities which issue dependable or widely current certifi¬ 
cates of ownership. Hence the farmer is not able to realize the 
necessary funds through these means, or if able he has to pay 
so high a rate of charges and interest that the transaction is 
unprofitable. The result is that he finds it necessary in many 
cases, or advisable in many more, to sell. This pressure during 
the fall months depresses the price below the real value of the 
commodity, or at least prevents the price from rising to the real 
value and a great part of it carried across the seas and, as 


20 


aforesaid, distributed throughout the succeeding period as de¬ 
mand calls for it, and hence at a higher relative price, to the 
profit not of the man who produces the grain, but of the man 
who bought it cheap and marketed it properly. 

“The obvious remedy for this condition is to supply the 
producer with inexpensive warehouse service and with a cer¬ 
tificate of ownership of undoubted solvency and wide currency. 
In such case, if the price does not suit, or if for any other reason 
it is advisable to withhold grain from the market, the owner 
can store in such inexpensive warehouses and receive therefor 
the said solvent and widely current certificate of ownership, 
upon which he can, under the new national financial regime, 
practically at all times borrow the money necessary to meet 
his obligations, and, what is equally important, due to the 
probity of his collateral, borrow it at a low rate of interest. 
To supply the warehousing facilities and the ownership cer¬ 
tificate of the character stated is exactly what the new grain 
elevator is designed to do and exactly what it will do. 

“I do not believe any agency other than the people them¬ 
selves, through their governmental forms, could construct and 
operate the proposed facility so as to bring about the desired 
results. ’ ’ 

Federal Reserve System. 

The Federal Reserve bank act which amongst other things 
affords means of rediscounting commercial paper is probably 
one of the most constructive pieces of legislation enacted by 
Congress in many years. Under the rules promulgated by the 
Federal Reserve Board, commercial paper such as warehouse 
receipts for grain may be rediscounted where such paper bears 
interest not to exceed 6% upon presentation by any member 
bank, State or National, of the Federal Reserve region that 
they are located in. 

This law has provided an elasticity to our currency whereby 
no member bank of the Federal Reserve need refuse to extend 
credit for the lack of funds. The funds of each of the Federal 
Reserves can readily be used to meet the requirements of each 
of the twelve Federal Reserve regions under the law. Any 
member bank failing to accomodate its customers on the plea 
of insufficient funds violates the spirit and intent of the law. 
No such condition can possibly arise as a lack of funds when 


21 


a member bank is complying with the letter and spirit of the 
law. Nor is there any need today of any customer that pos¬ 
sesses any commercial paper that comes within the meaning 
and intent of the Federal Reserve Bank Act and the rules pro¬ 
mulgated by the Federal Reserve Boards paying a rate of 
interest upon the loan greater than 6%. This feature of the 
law was clearly defined and specifically emphasized by the 
Honorable Wm. G. McAdoo, Secretary of the Treasury, at a 
reception tendered him at Seattle upon his recent visit to this 
State. 

Using the Machinery Provided. 

To the extent that the farmers utilize intelligently credits 
provided by the Federal Reserve Bank Act, and to that extent 
only, will the benefits acruing from such constructive legisla¬ 
tion be felt by the people in the grain producing belts. The 
simple fact that a law appears upon our Federal statute books 
does not in itself benefit those that it was intended to so benefit. 
Only by common understanding and general use does such 
legal machinery become beneficial. Such governmental agen¬ 
cies should be used to their fullest capacity by those needing 
them in order to establish to the fullest measure the beneficial 
results to be obtained. 

Corporate bodies have long ago learned to utilize to the 
fullest extent every governmental function to aid their pur¬ 
pose. This practice has in a great measure been responsible 
for the success of corporations. 

The public generally must learn to utilize governmental 
agencies which are intended for their own to their fullest ex¬ 
tent in order to lift up the average man and give him comfort, 
leisure and progress. 

Government Loans on Public Warehouse Receipts. 

The time is coming when the farmer’s wheat, shipped 
by him direct and stored in the publicly owned and operated 
concrete elevator in Seattle will be looked upon as the equal 
to any two-name commercial paper offered to the Federal Re¬ 
serve Board by any city bank as security for increased circu¬ 
lation. I am going to do what I can to stimulate such amend- 


22 


ment to the Federal Reserve Act as will enable the farmer to 
send his warehouse receipt to the Federal Reserve Board and 
receive a loan of 40% of the normal value of his grain. Of 
course this implies Federal Inspection of grain at the public 
terminal or exporting elevators, and the elimination of a whole 
horde of meddling middlemen. I would free the farmer from 
the dictation of the warehouse men, the railroad freight agent, 
the frightened little country bank and insolent big city bank, 
the gambling wheat broker at the terminal market, and to a 
degree from the ancient practices of the great foreign export¬ 
ing concerns, who exact from 6 to 10% of the freight charges 
paid by Americans. I can conceive of no medium of exchange 
more attractive than a certificate of a qualified Federal offi¬ 
cial that the holder thereof is entitled to a carload quantity 
of first grade wheat publicly owned and 


operated elevator at ti 



23 


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